Suppose that five out of ten investments made by a VC fund are a total loss, meaning

Question:

Suppose that five out of ten investments made by a VC fund are a total loss, meaning that the return on each of them is −100%. Of the ten investments, three break even, earning a 0 percent return. If the VC fund’s expected return equals 50%, what rate of return must it earn on the two most successful deals to achieve a portfolio return equal to expectations?
Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these...
Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question
Question Posted: